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2000 ANNUAL REPORT
Competitive
Anywhere in the World
Competitive
Anywhere in the World
KO
ITOM
AN
UFA
CTU
RIN
GC
OLTD
2000
ANNUAL
REPORT
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KOITO MANUFACTURING CO., LTD. has led
the way in optics since 1915, when it
developed the fresnel lens for
Japan’s first railway signals.
Today, the Company’s integrated
optical and electronic technologies--
as applied in its lighting equipment
for automobiles, aircraft parts, and
other products--continue a tradition
of global innovation for safety.
about Koito
Competitive Anywhere
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page 02... message from the president
page 06... competitive anywhere in the world
page 12... review of operations
page 17... environmental activities
page 18... board of directors
page 19... financial section
page 20... six-year summary
page 21... management’s discussion and analysis
page 24... consolidated balance sheets
page 26... consolidated statements of income
page 27... consolidated statements of shareholders’ equity
page 28... consolidated statements of cash flows
page 29... notes to consolidated financial statements
page 34... report of certified public accountants on the
consolidated financial statements
page 35... network
page 36... corporate directory
page 37... investor reference
contents
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Cautionary Statements to Forward-Looking StatementsThis annual report contains forward-looking statements concerning KOITO MANUFACTURING CO., LTD. and consolidated subsidiaries future plans, strategies and performance.These forward-looking statements are not historical facts, rather they represent assumptions and beliefs based on economic, financial and competitive data currently avail-able. Furthermore, they are subject to a number of risks and uncertainties that, without limitation, relate to economic conditions, worldwide competition in the automotiveindustry, customer demand, foreign currency exchange rates, tax rules, regulations and other factors. Koito therefore wishes to caution readers that actual results may differmaterially from our expectations.
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message from the president
Koito continues to push on with
the development of new technolo-
gies and new products, while also
working toward the shortening of
the product development cycle and
the streamlining of production
systems. These endeavors are tak-
ing up the slack resulting from
the stagnation in domestic auto-
mobile production.
Soaring overseas demand is being
met with the reinforcement and
expansion of overseas subsidiar-
ies. This in turn represents the
completion of a series of manu-
facturing bases spanning Japan,
the U.S., Europe and Asia.
JUNSUKE KATO, President
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KOITO MANUFACTURING CO., LTD.
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Current Trends in the Automobile Lighting Equip-
ment Industry
The Japanese automobile industry continues to suffer,
with fiscal 2000 seeing it produce fewer than 10 million
units for the second consecutive year. The steady fall
from fiscal 1990’s peak of 13.59 million units produced
is the result of a variety of factors, including the pro-
longed recession, the appreciation of the yen and the
attendant shift on the part of auto makers to overseas
production bases. Increasing demand in North America
and several main developing countries spurred total
overseas production on, with total worldwide automobile
production rising to 56.28 million units.
Koito is pushing forward with the development
of high performance, value-added products designed to
deal with new issues in safety and energy efficiency, as
well as cater to new automobile models and revisions
to existing models. These endeavors are taking up the
slack resulting from the stagnation in domestic auto-
mobile production. Overseas, each company in the in-
dustry is focusing on aggressive growth through their
affiliates.
Consolidated Business Results for the Fiscal Year
Ended March 2000
Net sales rose 1.1% over the previous year to ¥279,034
million. This was primarily a result of marketing efforts
focusing on expanding the sales of new products in light-
ing equipment for automobiles, which accounts for
approximately 70% of total sales.
The automotive lighting equipment division saw
sales increase 3.7% to ¥198,381 million. Reinforcing
product performance was one factor here. Increasing
demand for and exports of gas discharge headlamps
and multi-functional headlamps also contributed.
In the non-automotive electrical equipment divi-
sion, strong demand for Shinkansen devices led to ex-
pansion in railway equipment. Cutbacks in orders of
traffic signals and other public safety equipment on the
part of local government dragged results for the entire
division down 1.9% to ¥59,168 million.
The other products division saw sales fall 11.6%
to ¥21,483 million. Lower aircraft production and a
slump in bulk orders for aircraft seats in the aircraft parts
sector were responsible for the drop.
Income suffered despite sales growth and the
pursuit of low cost operations in the form of reductions
of fixed costs and the shortening of the product devel-
opment cycle. Depreciation on capital investments in
headlamp production facilities at overseas subsidiaries
was a chief factor. Operating income sank 9.0% to
¥9,288 million, with consolidated net income falling
11.3% to ¥3,412 million.
Achievements of the Fiscal Year Ended March 2000
As outlined above, the number of automobiles produced
domestically is steadily declining. Koito continues to
push on with the development of new technologies and
new products however, while also working towards the
shortening of the product development cycle and the
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2000 ANNUAL REPORT
streamlining of production systems.
Shortening of the product development period
is a necessary response to reductions in the automobile
development period throughout the industry. Koito aims
to be able to commence mass production within 11
months of receiving product specifications from auto-
mobile manufacturers. Accordingly, we have developed
a digital mockup system which makes test models
redundant by digitally representing products to be
tested. This new system cuts the number of development
steps far below that required by conventional methods.
Production systems have seen new efforts to
support low volume production of a wide variety of
items. Koito’s unique production management system,
the Koito Production System (KPS) has raised efficiency
to a new level in this respect. Koito’s lineup of
automotive parts consists of 30,000 different items.
Inventory turnover at Koito’s own production facilities
is approximately twice per month, a level unmatched
except at manufacturers where all sales are handled
by a subsidiary.
Soaring overseas demand is being met with the
reinforcement and expansion of overseas subsidiaries.
Headlamp operations have been established in both the
U.K. and Korea, and all seven overseas subsidiaries have
put in place organizations capable of manufacturing a
comprehensive range of automobile lighting equipment.
This in turn represents the completion of a series of
manufacturing bases spanning Japan, the U.S., Europe
and Asia.
Thailand and Korea are achieving particularly
notable growth in sales, thanks to the full-fledged
recoveries their respective economies are making. Pro-
duction management systems are also becoming ever
more integral parts of Koito’s manufacturing bases, as
are the personnel exchanges and joint R&D activities
needed to make them possible. These systems are ab-
solutely essential to maintaining the superlative prod-
uct quality that is a trademark of Koito. In July 1999, the
Koito Europe Technical Center (KETC) was established
in the suburbs of Brussels. This will play a big part in
allowing us to meet customer demands on time. In the
development of new technology, Koito became the first
official non-European company member of the Adaptive
Frontlighting System (AFS) Project. This accomplishment
was further proof of Koito’s status as a world-class player
in developing new technology.
Outlook and Plans for the Fiscal Year to End March 2001
The Japanese economy is predicted to make steady
progress on the road to recovery. However, there remain
many causes for concern, including a surplus of pro-
duction capacity, an uncertain employment picture and
the continuing stagnation of consumer spending. Eco-
nomic conditions may remain difficult for the foresee-
able future Domestic automobile sales have been
forecast to manifest slight growth. The expansion of
overseas automobile production is likely to stifle exports
however, making a recovery in the number of vehicles
produced in Japan unlikely.
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KOITO MANUFACTURING CO., LTD.
Koito intends to meet these challenges by taking
product performance and R&D activities to new levels.
Simultaneously, we will work towards shortening the
product development period, cutting costs through a
variety of streamlining measures and boosting sales.
Modularization of parts and Intelligent Transport System
(ITS) related areas are two fields in which growth is pre-
dicted, and both will see timely and appropriate
responses from Koito. At the same time, our development
of new technology will stay ahead of market and consumer
needs and our commercialization of new advances will
be prompt. We will be building on our position as a global
supplier as auto makers increasingly seek to procure
parts from the optimum locations anywhere in the
world. That means enhancing our product development,
manufacturing and sales activities at overseas bases. A
mutual supply structure will be established among Koito
companies to cover all four of our major operating
regions: Japan, the U.S., Europe and Asia.
The steps outlined above are expected to take
net sales up 4% to ¥291,400 million. Income before
income taxes is predicted to rise 34% to ¥11,300 million.
Net income is expected to drop 44% to ¥1,900 million
however, due to the amortization of a ¥10,600 million
in pension funding shortfall due to the adoption of new
accounting standards for retirement benefits. This drop
will therefore be no more than a temporary downturn,
with the following year predicted to see a return to form.
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Boosting Corporate Trust Through Higher Product
Quality and Environmental Awareness
The Koito Group creates customer needs based around
the theme of light; this is the basis of our contribution
to society. It is also the foundation of our most basic
management policies, which call for mutually benefi-
cial relationships with customers, shareholders, employ-
ees and related businesses. In order to maximize the
satisfaction of all these parties, Koito is taking up envi-
ronmental preservation as another central management
theme. Formulating appropriate measures will see the
trust placed in Koito as a corporation grow even more.
Koito’s recycling and environmental activities
have been evolving constantly in recent years. In January
2000, our three main production facilities, the Shizuoka
plant, the Kikkawa plant and the Fujikawa plant,
achieved ISO14001 certification for their environmen-
tal management systems. The remaining facilities, such
as the Haibara and Sagara plants, obtained the same
certification in July 2000.
I ask for the continued understanding and sup-
port of our shareholders throughout the year to come.
JUNSUKE KATO, President
September 2000
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TechnologyPRODUCTS AND TECHNOLOGY AIMED FIRMLY AT THE FUTURE
Broadly speaking, Koito Manufacturing’s technological development in the area of automobile
components is divided into three categories. The first is its continually evolving product devel-
opment, keeping it at the forefront of the world market in this field. The second consists of ac-
tivities to shorten the development period. The third is the globalization of technological
development operations.
WORLD-LEADING PRODUCT DEVELOPMENT TECHNOLOGY
The gas discharge headlamp (GDHL), first introduced by Koito in 1996, is posed to become the
primary automotive headlamp technology in the 21st century. GDHLs, which use an arc dis-
charge to generate light, offer three times the brightness, twice the life time and 70% of the
energy consumption of conventional halogen headlamps. Fiscal 2002 is set to see the number
of automobiles equipped with them in Japan exceed 1 million. At present, GDHLs tend to be of
the four lamp system. Koito is developing a two lamp system as well though, and is due to
commence mass production this year. With this new system, Koito will be able to promote
GDHLs for use mini-vehicles, too.
Ballast starters are the most vital components in GDHLs. Mass production of the Version
3 ballast starter, offering the world’s highest reliability, has been under way since the fall of
1999. Less than half the size and notably lighter than its predecessors, this new ballast starter
has won praise from automobile makers throughout the industry. It is also a perfect example of
Koito’s expertise in the development of new technology. Another illustration is the Version 2 dy-
namic auto-leveling system, used to keep the beam axis of the headlamp at a constant angle to
the road when a vehicle is in motion. Previously, these leveling systems required two vehicle
height sensors for the front and rear wheels. The new system utilizes the signal from the seating
sensor so that only a single height sensor for the rear wheels is needed.
For signalinglamps, Koito is concentrating on the development of LED lamps; commer-
cial production is expected to begin in the near future. Able to emit light instantaneously and
conserve energy, LEDs offer the dual advantages of greater safety and minimal environmental
impact.
Environmentally Friendly—Koito makes the utmost efforts to fabricate headlamps that
are friendly to people and the environment. One way is by designing products and components
competitive anywhere in the world
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A
Vision
Extending
Many Years
Ahead
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GDHL ballast starter
Ballast starters are the key components
of discharge headlamp systems. Koito has
pushed forward with miniaturization in
this area, and has succeeded in producing
a ballast starter capable of fitting inside
the lamp space.
Digital mockup
Computers are used to create digital mockups of products, which are then
used in simulations. This process allows the development of high-quality
products in a short period, and removes the necessity of making test models.
Koito Europe Technical Center
The Center opened in Zaventem in
Belgium in July 1999, to serve as the
base for Koito’s automobile lighting
design and development activities in
Europe. It is expanding Koito’s client
base throughout the continent.
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that can be easily recycled. Eliminating hazardous substances from components and production
processes is another key theme. An example of this attention to environmental issues is the
use of a gel instead of glue to attach headlamp components to each other. This makes
headlamps easy to take apart for replacing and recycling. The shift from thermosetting resins
to thermoplastic resins is one example of accomplishments in this area. Light bulbs are ben-
efiting from research into more durable coatings and coloring agents. Mass production of lead
and cadmium free light bulbs incorporating these new advances has already commenced.
SHORTENING THE PRODUCT DEVELOPMENT PERIOD
Recent years have seen new model development periods shortening at automobile makers.
Accordingly, component makers too are being afforded far less time to develop their products.
Koito is active in the application of concurrent engineering (CE), which allows simultaneous
progress in product design, the preparation of molding equipment and evaluation of product
performance. Koito has also introduced a digital mockup system. This allows development, de-
sign and performance evaluation to take place with data alone, eliminating the need for physi-
cal prototypes. Improvements such as these have slashed the previous product development
period of 18 months down to 11 months. This puts Koito at the very top of the world scale in
this vital respect, which has been acknowledged by overseas makers as well.
In addition, Koito adopts a “concept-in” development process. Here, Koito works with
auto makers from a new model’s initial planning stage onward to determine the specifications
required. Koito is determined to further reduce its product development period to less than
ten months. Designing should be more efficient and accurate. Further shortening the cycle will
be the use of parametric designs and knowledge CAD, which incorporates a wide range of
regulations and standards.
GLOBALIZATION IN TECHNOLOGICAL DEVELOPMENT
For over ten years, Koito maintained a base in Brussels, Belgium, with the objective of gather-
ing European technology-related information and obtaining type approvals for headlamps and
other signalinglamps. By way of preparation for the expansion of Koito’s business in Europe,
the base was relocated to Zaventem in the suburbs of Brussels. In 1999, this facility became
the Koito Europe Technical Center (KETC). It is playing an integral role in the development of
new technology ranging from initial concepts through to product design, geared towards
boosting the number of orders received from European automobile makers. Koito is aiming to
establish a development chain that spans Japan, the U.S., Europe and Asia. To achieve this
goal, it will further expand its existing development centers.
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In 1999, Koito was chosen as the first non-European company to become an official
member in the Adaptive Frontlighting System (AFS) project, one of the Eureca projects. The
AFS project focuses on the development and regulation of frontlighting systems which auto-
matically ensure that illumination adapts to changing road environments and weather condi-
tions. Koito is actively involved in all aspects of this project, from development to regulation.
FUTURE TRENDS IN TECHNOLOGICAL DEVELOPMENT
Koito places great importance on Product Data Management (PDM), which involves the inte-
gration of data relating to all facets of products, from development and production to sales.
Paying no regard to national boundaries, this information is shared throughout the entire Koito
Group, and is used to improve efficiency in product and technological development. All mem-
bers of the group help each other through this mutual information sharing. Koito technology
headquarters has itself been at the heart of this system. It assumes responsibility for hosting
the All Koito Technology Conference, dedicated to boosting technological prowess and effi-
ciency in R&D activities throughout the Koito Group.
INVOLVEMENT IN INTELLIGENT TRANSPORT SYSTEM (ITS)
DEVELOPMENT
As one part of ITS research in Japan, work is proceeding on the development of probe cars*.
Within this area, KOITO INDUSTRIES is handling traffic information systems and other elements
of the infrastructure. Meanwhile, Koito Manufacturing is focusing its efforts on the vehicular
side. By bringing together the expertise of all Koito Group members, the entire group is able to
function as a single unit, thereby participating in a broader range of ITS development.
*A probe car is an automobile equipped with a mobile phone style transmitter which sends its own information to the control center. Through the GPS, the automobile gathers information on traffic, road and weather conditions.
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Consistently
High Productivity
and
Reliability
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GDHL
GDHLs emit a natural light of great brightness.
They also excel in terms of both energy effi-
ciency and longevity, making them extremely
environmentally friendly. Used in conjunction
with auto-leveling technology, they make
night-time driving safer than ever before.
Resin lens
Resin lenses, for use in headlamps of
i r regu la r shape , a l low inc reased
customizability of vehicles, while also
increasing fuel efficiency through cutting
weight. Furthermore, they are easy to
recycle.
GDHL Assembly
Each stage of Koito’s state-of-the-art as-
sembly lines is fitted with a battery of
testing equipment, providing item-by-
item inspection to produce high-function
and high-performance GDHLs.
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KOITO’S PRODUCTION SYSTEM--SUPPORTED BY HIGH
PRODUCTIVITY AND TRUST
Current demand in the automobile market centers largely around diversity in models available,
high quality at affordable prices and the reduction of production lead time. To cater to these
needs, Koito introduced the Koito Production System (KPS) several years ago, a system which
has yielded great advances in low volume production of a wide variety of items. KPS is designed
to boost cost reduction activities by dramatically cutting down on waste in production processes.
KPS’ most notable advantages lie in its underlying Just in Time (JIT) thinking and its reli-
ance on “Jidoka” (automation). JIT refers to a system whereby production and transportation
are closely coordinated so that the desired products are produced and delivered in the exact
quantity at the right time. Koito has established production lines which meet customer needs
by allowing low volume production of a wide variety of items. Between 10 and 20 different
models of a product can be created in a single line per day, and 20 to 30 in a month. The as-
sembly of modules of completely different shapes presents no problems under this system, as
the relevant tools and jigs can be changed in a short time. Koito has also adopted the
“Kanban” method to make JIT production possible. Through the use of cards, “Kanban” in
Japanese, that accompany each production lot during the assembly process, overproduction
can be avoided. This makes it easier to eliminate inefficiencies during production.
“Jidoka” is being pursued at production facilities as part of Koito’s drive for heightened
efficiency. Aiming to eliminate faulty products, production systems automatically detect ab-
normalities in equipment or product quality. Sections of production lines are brought to a halt
and the abnormality is brought to the operator’s attention. Technicians track down the cause
and make the necessary improvements to prevent its reoccurrence. Quick identification of
problems has the added advantage of restoring normal operation more quickly. Production ef-
ficiency is a prerequisite for effective cost reduction activities. Furthermore, all of Koito’s auto-
mated equipment incorporates the know-how gained over long years in this field. Its excellence
is attested to by its introduction by other companies producing automobile components.
KPS improves distribution too, by allowing the simultaneous transport of products and
information. Meeting delivery deadlines is of the utmost importance to component makers,
and Koito has a 100% record in terms of its production lines. In components, this record is
very near to 100%. Through increasing the frequency of deliveries, JIT enables Koito’s customers
Manufacturing
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to boost their own production efficiency and keep down inventories. More deliveries also cuts
Koito’s own inventories. Fiscal 2000 saw total inventories of only ¥5,823 million, a remarkably low
figure when compared to net sales. In fact, inventories averaged a mere 47% of monthly sales.
Koito is currently introducing KPS at all overseas subsidiaries to ensure that they de-
liver the same sterling product quality as domestic production operations. The entire Koito
Group is conducting a dynamic exchange of production management staff. The Shizuoka plant
is a center of these activities, with training of overseas production managers and supervisors
taking place there several times a year. Parent company staff also head overseas to enhance
Koito’s continuing education programs, and play their part in bolstering production efficiency
and product quality.
AIMING TO LEAD THE WORLD IN PRODUCT QUALITY
Koito incorporates product quality considerations into its products right from the planning and
design stages. To this end, the Quality Assurance Division carries out functional tests on all
products. But Koito’s insistence on excellence goes further. Not content with conforming only
to established guidelines and regulations, Koito set up the Testing Division in 1998 to conduct
experiments to ensure that its products conform to the demands of the market. The division
then works to transform the knowledge gained into new standards for Koito products. Another
quality improvement was achieved through its evaluation simulation system, which predicts
problems that may take place when the lamp is actually mounted on a vehicle. The technology
used in this testing process is the subject of joint research with Tokyo University. Koito is also
active in the development of testing equipment, another area in which it outshines its com-
petitors in the domestic automobile components market.
Product quality management demands the attention of every single Koito employee. To
this end, Koito is integrating education programs into its Total Productive Maintenance (TPM)
scheme, a scheme dealing largely with preserving quality standards. TPM activities are being
carried out at all manufacturing bases and divisions. Results are released periodically both within
the company and externally, a policy that ties into further improvements in product quality.
Quality
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The
Trust That
Product
Quality Brings
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Dark room
Koito ensures that its products match up to
safety requirements all over the world. The dark
room plays host to experiments designed to
ensure that Koito’s headlamps optimize visual
conditions for oncoming drivers, as well as fully
illuminating the driver’s own field of vision.
External environment experiments
Koito’s products need to be able to
function under any and all road and
weather conditions, from snow-
capped mountain peaks to baking
deserts. To this end, products being
tested are exposed to extremes of
shock and temperature over long
periods, to find out just how far they
can be pushed.
Anechoic chamber
Anechoic chambers allow the accurate mea-
surement of the electromagnetic waves emit-
ted by products containing electronic
components, such as GDHLs, and the effect
of that radiation on other electronic devices
and components in a vehicle. This data allows
Koito to continually improve its products.
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Koito’s quality assurance system is distinguished by a detailed inspection system incor-
porated in each production process. At each step, manufacturing equipment is integrated with
devices to test light distribution, illumination performance, water resistance and other proper-
ties. This approach ensures that all products have completed exhaustive testing by the time
they are delivered to customers. Further precautions are exercised during production steps
particularly susceptible to human error. These include incorporating distinct features into parts
likely to be confused with others and similar measures.
These activities have seen product quality indicators improve steadily. A large number
of automobile manufacturers, including Toyota, have given Koito awards in recognition of its
excellence with regard to the quality of its products.
PROGRESS IN PRODUCT MANAGEMENT QUALITY AT OVERSEAS
SUBSIDIARIES
Koito is making progress overseas to bring product quality up to parent company standards in
accordance with the quality improvement plan. Central to these activities is parent company
guidance and training, which takes the form of assigning staff to overseas subsidiaries to help
with technological and product quality issues at the development stage of each project. The
Shizuoka plant is one focus for these activities, conducting training of overseas production su-
pervisors several times a year. This program, known as the supervisor system, pays dividends in
terms of higher overseas product quality.
Koito Europe Limited (KEL) formed a self improvement team in 1997 with the aim of
bringing about new gains in QCD (quality, costs, delivery). Examining customer demands from
all angles, it has dedicated itself to doing whatever is necessary to make improvements. To
date, KEL has been successful in maintaining a zero-defect rate on products delivered, and has
also made gains in cost reductions and on-time deliveries. In recognition of the greater levels
of excellence being achieved by KEL, Honda UK chose the company for its best supplier of the
year award in July 1999 from among its 242 suppliers.
NEW GOALS IN PRODUCT QUALITY MANAGEMENT
Koito aims to obtain ISO9001 certification at all seven of its overseas subsidiaries to reinforce
its product quality management structure on an international basis. Six of these subsidiaries
have achieved this target already. Koito itself has plans to obtain QS9000 certification in order
to raise its quality assurance skills to an even higher plane.
To achieve even more demanding quality standards, Koito is raising the target for gas
discharge headlamps (GDHLs), halogen and other bulbs from the current 1.3ppm to less than
1.0ppm. In assembled products. Koito aims to increase the quality line from 15ppm to less
than 10ppm, eventually halving this figure over the next three years.
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In 1998, the Koito Group made fully consolidated subsidiaries of its
production bases in North America, Europe and Asia. This move rep-
resented the establishment of a structure spanning Japan and these
three other main markets. At present, automobile makers are commit-
ting themselves to global production of models conceived of as stra-
tegic products with international appeal. The strength of the Koito
Group lies in its ability to deliver parts of uniformly high quality
to automobile production centers, wherever they may be in the world.
Aiming to take its share of the automobile lighting market up from
today’s 18% to 25% by the year 2005, Koito will make new efforts on
a number of fronts. Technological development, efficiency in produc-
tion systems and even higher product quality are all areas which will
see the whole company making great strides in the years to come.
Market••• The domestic automobile market was
supported by continuing strong demand for mini-cars,
which took sales up marginally higher than in the pre-
vious year. Due to sinking exports however, total do-
mestic production remained under the 10 million
mark for the second consecutive year. Outside the au-
tomobile market, the tardiness of economic recovery
adversely affected sales.
Koito Group Activities••• The Koito Group
consists of 23 companies, 16 domestic and seven overseas. Do-
mestic operations cover not only automobile lighting, but a wide range
of other lighting equipment and electronic components. This includes aircraft
lighting, control systems for rail transports, traffic control systems, external lighting, lighting components and metal dyes.
Koito’s offerings in the field of automobile lighting have earned a solid reputation for their added-value features,
and rode out the effects of the drop in automobile production to extend sales. Excluding automobile lighting and aircraft
electronics, however, net sales and earnings both suffered. Falling sales and earnings on the part of KOITO INDUSTRIES,
LIMITED, responsible for railroad car control equipment, traffic control systems and other areas since Koito’s establish-
ment, were a key factor here.
Fully 60% of KOITO INDUSTRIES’s sales are to governmental bodies. The development and delivery of traffic information
systems related to Intelligent Transport Systems (ITS), the highway traffic system gaining rapid acceptance in recent years,
holds promise of stable sales growth through public-works expenditures. KOITO MANUFACTURING also intends to make
headway in this area through joint activities with KOITO INDUSTRIES.
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NorthAmerica
Market••• The U.S. automobile market continued to
grow, with 1999 surpassing all previous records for production
and sales. Predictions suggest that the market will contract from now
until the end of 2002, resuming expansion in 2003.
Koito Group Activities••• The automobile lighting market is experiencing trends toward greater size
and improved functionality. North American Lighting, Inc.’s two production facilities at Flora and Salem have been the focal
points for increased efforts to cater to these two trends. Major capital invest-
ments were either completed or started in fiscal 2000 and fiscal 2001. The
Flora plant’s entire production capacity was devoted to headlamps, with
the Salem plant committing itself to indicators. The resulting gains in
productivity along with the introduction of new equipment significantly
raised overall efficiency. Cost reduction is another area benefiting from
these changes. A downturn in the U.S. automobile market cannot be
ruled out, but the investments were essential to ensure that Koito can
keep up with the U.S. activities of Japanese automobile makers and the
introduction of new models. These developments are expected to serve
as a stepping stone to increased market share for the Koito Group. 37
North American Lighting, Inc. (NAL) manufactures automo-bile lighting equipment and sells its to a broad spectrum ofautomobile makers in North America, both Japanese andnon-Japanese. It is also the largest automobile lightingequipment maker in the continent that is not a member ofa conglomerate.
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EuropeMarket••• The European automobile market
was stable throughout the year. Continental Europe
performed particularly well due to the weakness of
the euro. The U.K. saw the strength of the pound re-
sult in stagnation in production and sales. Production
facilities have started to move to the continent in response
to this trend. Sales expansion is predicted in former Eastern
Bloc countries.
Koito Group Activities••• Koito Europe Limited com-
menced production of automobile headlamps in April 1999, and is currently engaged in expanding production facilities. July
2000 saw production and delivery start of headlamps for the Renault R900 (Twingo). Orders were received from a variety
of other European makers, leading to the decision to increase produc-
tion capacity. Current capacity of 400,000 headlamps and 1 mil-
lion indicators is set to rise to 1 million headlamps and 1.3
million indicators during 2003.
37
Koito Europe Limited (KEL) does not limit its activities toEuropean automobile makers. On the contrary, it is alsobolstering marketing operations aimed at Japanese makersexpanding into European countries.
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AsiaThe progress the Asian economy
made on the road to recovery
during 1999 was promising. All
countries in the region are
witnessing favorable trends,
which are expected to continue
into the future.
ChinaMarket••• In 1999, General Motors (GM) opened
up a base in Shanghai. China’s forthcoming entry to the WTO
will bring down import duties, and although notable increases
in domestic automobile production are too much to hope for, personal
consumption will rise along with the standard of living. Stable growth in
this market can be expected as a result.
Koito Group Activities••• With Volkswagen and GM making advances into Shanghai, Shanghai Koito
Automotive Lamp Co., Ltd.’s market share in automobiles destined for North American and European markets is on the
rise. Expansion is proceeding smoothly, facilitated by Koito’s lack of competitors in Shanghai. In 1999, internal production
of metal dyes started, marking the completion of an integrated system ranging from production through to assembly.
Furthermore, in order to accelerate product development within China, Koito commenced construction of a technical
center in June 2000, due to be completed in 2001.
ThailandMarket••• Thailand’s political and economic situation is among the most stable in Asia, and the country possesses
considerable growth potential. Automobile production peaked in 1996, then fell sharply. However, 1999 saw production
start to grow again and the year 2002 is set to break previous records.
Koito Group Activities••• THAI KOITO COMPANY LIMITED commenced production activities in 1990. In
1999, it manufactured more parts than in any other year since its establishment, to the value of 800 million baht. This figure
is expected to double in either 2002 or 2003. THAI KOITO obtained QS9002 certification in December 1998, and is actively
involved in overseas exports as a key production center for the Koito Group, backed up by the outstanding product quality
of that group. Gas discharge headlamp (GDHL) production is also due to commence in the not too distant future.
37
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KoreaMarket••• Economic recovery is moving along as steadily in Korea as in the rest of Asia. Automobile production
climbed to between 2.6 and 2.7 million units in 1999. Exports, accounting for 53% of all output, were especially healthy,
with Koito using its cost competitiveness in compact cars to expand its share of the U.S. market.
Koito Group Activities••• Koito invested in Inhee Lighting Co., Ltd. in 1997, and in rear lamps, the
company leads the Korean market with a market share of 60%. May 1999 also saw the commencement of headlamp
production, and production facilities are being expanded to cater to increases in orders. The majority of Inhee Lighting’s
output is destined for Hyundai Motor Company, but exports of finished products to Japanese auto manufacturers are
another contributor to earnings here.
TaiwanMarket••• Nearly 100% of Taiwanese automobiles are produced for domestic use, and production is stable at 4 million
units per year.
Koito Group Activities••• Ta Yih Industrial Co., Ltd. maintains a share of 95% in the Taiwanese market,
but the limits to future growth in the automobile lighting market have already become apparent. While catering to the need
for larger size, value-added products, Ta Yih Industrial will increasingly turn its attention to production and sales for non-
automotive markets such as aircraft and railroad cars. Exports are another area seeing new focus, notably in metal dyes
and head and rear lamps to Japan.
IndiaMarket••• India is predicted to experience particularly significant growth. In 1999, total production came to a record
800,000 vehicles, a figure likely to exceed the million mark during 2001. Japanese makers are at the forefront of the global
advance into this market, one which holds promise of exceptional growth.
Koito Group Activities••• Moving into India in 1999, Toyota commenced production of its multi-purpose
Quoris line. The Koito Group is also providing components for Maruti, a joint venture between Suzuki and the Indian gov-
ernment. India Japan Lighting Ltd. has seen sales increase on the back of headlamp orders accompanying the introduction
of new models by its customers. Sub-components such as resin lenses for use in headlamps, hitherto imported from THAI
KOITO, will be produced internally from September 2000. This step will mark the full-scale commencement of Koito’s
headlamp production in India.37
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environmental activities
ENVIRONMENTAL ACTIVITIES
� Since 1991, Koito has been actively engaged in reducing the amount of industrial waste it produces. Fiscal 1992 saw the
establishment of a plan to cut this waste, some 6,500m3 at the time, by half within five years. This goal was achieved during
1995, with the volume of waste having been reduced to 3,013m3. This success was followed by the establishment of a
second-stage plan, which called for a further 50% reduction over the next five years. Again, this target was met ahead of
schedule, with fiscal 2000 waste amounting to only 1,100m3. Plans exist to reduce waste to no more than 750m3 during
fiscal 2001. Additionally, the total recycling rate for fiscal 2000 came to 84.4%.
� Reducing emissions of environmentally harmful substances is another area Koito takes very seriously. Accordingly, the Com-
pany abandoned use of organic chlorine compounds in 1999, which had been used in paint stripping applications up until that
time. Measures geared toward cutting dioxin emissions are also making steady progress. Aiming to take emissions as close as
possible to zero, Koito is reducing the amount of waste it incinerates, and has installed more sophisticated incinerators.
� As part of its energy efficiency measures, Koito has added cogeneration facilities at its key manufacturing plants in Shizuoka,
Haibara. Moves toward energy efficiency facilities and equipment are also progressing smoothly. The 1999 shift from hy-
draulic power to electric power in plastic molding equipment is one example.
� Investments in environment-related facilities and equipment totaled ¥215 million in fiscal 1999, and are expected to come to
¥186 million in fiscal 2000.
� Koito is firmly resolved to actively increase its involvement in environmental preservation on a company-wide basis.
ENVIRONMENTAL POLICIES AND SYSTEMS
In 1972, KOITO MANUFACTURING CO., LTD. founded a Safety, Hygiene and Environmental Office to provide an
organization devoted exclusively to the task of addressing environmental issues on a company-wide basis.
Going one more step, Koito established a Recycling Committee in 1991 to further enhance its efforts toward
environmental preservation.
January 2000 saw Koito obtain ISO14001 certification at its Shizuoka plant, Kikkawa plant and Fujikawa
plant. The Haibara and Sagara plants were close behind, obtaining the same certification in July 2000.
Koito intends to up its efforts in these respects, so that they involve every member of the Koito Group.
Aiming to become a company where environmental concern is apparent throughout the entirety of its opera-
tions, Koito will continue to be proactive in this vital area.
Environmental Management
37
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2000 ANNUAL REPORT
board of directors
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Chairman
Iwao Okijima
President
Junsuke Kato
Executive Vice Presidents
Takashi Ohtake
Ryuzo Kojima
Akira Koito
Executive Senior Managing Directors
Genpachi Sanada
Masahiro Ohtake
Executive Managing Directors
Toyofumi Nakagawa
Shigeo Mine
Noriaki Yonezawa
Takao Sato
Shuichi Goto
Norio Saguchi
Yutaka Furuyama
Directors
Kazuhiro Mori
Hiroaki Sakagawa
Koichi Katase
Keiji Kato
Mizuo Yamamuro
Isao Sano
Mitsuo Kikuchi
Standing Corporate Auditors
Akira Kamata
Toshio Yumoto
Corporate Auditors
Seiji Makita
Koichi Kusano
IWAO OKIJIMAChairman
JUNSUKE KATOPresident
TAKASHI OHTAKEExecutive Vice President
RYUZO KOJIMAExecutive Vice President
AKIRA KOITOExecutive Vice President
37
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page 20... six-year summary
page 21... management’s discussion and analysis
page 24... consolidated balance sheets
page 26... consolidated statements of income
page 27... consolidated statements of shareholders’ equity
page 28... consolidated statements of cash flows
page 29... notes to consolidated financial statements
page 34... report of certified public accountants on the
consolidated financial statements
KOITO MANUFACTURING CO., LTD.
financial section
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2000 ANNUAL REPORT
six-year summary
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Thousands ofMillions of yen U.S. dollars except
except per share amounts per share amounts
CONSOLIDATED 1995 1996 1997 1998 1999 2000 2000
FOR THE YEAR:
Net sales ¥225,120 ¥212,357 ¥220,045 ¥226,134 ¥275,934 ¥279,034 $2,628,676Operating income 11,069 9,608 10,607 8,540 10,201 9,288 87,498Income before income taxes 11,376 10,669 10,899 9,771 8,451 7,341 69,156Income taxes 6,994 6,427 6,310 5,836 3,486 2,997 28,233Net income 4,407 3,917 4,702 4,285 3,846 3,412 32,143
Amounts per share: (in yen and U.S. dollars)
Net income ¥27.47 ¥24.39 ¥29.24 ¥26.65 ¥23.92 ¥21.23 $ 0.20Cash dividends 9.00 8.00 9.00 8.00 8.00 10.00 0.094
AT YEAR-END:
Working capital ¥ 62,111 ¥ 64,752 ¥ 59,053 ¥ 55,348 ¥ 40,393 ¥ 51,060 $ 481,017Property, plant and equipment, less
accumulated depreciation 46,574 49,297 54,742 46,174 65,857 61,448 578,878Total assets 204,181 207,104 218,079 217,741 267,783 275,063 2,591,267Shareholders’ equity 72,897 75,589 78,881 81,313 90,291 92,848 874,686
Note: Amounts in U.S. dollars are translated from yen, for convenience only, at the rate of ¥106.15=$1,the rate prevailing on March 31, 2000
KOITO MANUFACTURING CO., LTD. and Consolidated SubsidiariesYears Ended March 31
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OUTLINE OF OPERATIONS
The Koito Group includes 20 consolidated subsidiaries, three affiliates, and the parent company KOITO MANUFACTURING CO., LTD.
Accounting for two of the three affiliates is based on the equity method. Consolidated subsidiaries, KOITO INDUSTRIES, LIMITED,
Koito Transport Co., Ltd., Minatsu, Ltd., and India Japan Lighting Ltd. end their fiscal years on March 31. The other 16 consolidated
subsidiaries compute their financial statements by provisionally closing accounts on March 31. The Group’s three major business
categories are lighting equipment for automobiles, non-automotive electrical equipment and other products.
OPERATING ENVIRONMENT
During the fiscal year under review, the Japanese economy continued to suffer from stagnation in consumer spending. However,
the government’s comprehensive economic package combined with reform in financial systems to lift the economy out of the
worst of the recession and set the stage for a gradual recovery. Overseas, Asian economies are rebounding rapidly as the effects
of the currency crisis fade away. The U.S. economy continued to perform strongly and the European economy also made signifi-
cant progress toward recovery.
The Japanese automobile industry saw domestic sales increase slightly over the previous year due to strong performance
from mini-cars. Exports fell however, bringing total domestic production down 0.4% to 9.93 million. Overseas, the U.S. automobile
market manifested high growth, recording highest-ever totals for both production and sales in 1999. In contrast, the European
automobile industry was relatively stable throughout the year. Continental Europe performed particularly well, with growth backed
up by the weak euro. Asian economies, previously struggling with problems precipitated by the abrupt fall in value of the baht in
1997, made a solid recovery in 1999. The whole of Asia is benefiting from favorable economic trends that are expected to continue
into the future.
NET SALES
Consolidated net sales rose 1.1% to ¥279,034 million. Sales in the automobile lighting equipment segment, Koito’s mainstay busi-
ness, increased 3.7% to ¥198,381 million, due to increased orders through stepped-up efforts in product competitiveness and the
growing adoption of discharge headlamps and multi-functional headlamps. The non-automotive electrical equipment segment
witnessed steady growth in sales of railroad car equipment, centered on shinkansen-related demand. Traffic control systems and
other public-safety related equipment saw a drop in orders from government bodies however, resulting in sales in this segment
decreasing 1.9% to ¥59,168 million. In the other products segment, aircraft-related business struggled. Aircraft parts sales were
lower due to falling aircraft production overseas and there was a decline in bulk orders of seats. As such, total sales for the
segment decreased 11.6%, coming to ¥21,483 million.
NET INCOME
In addition to raising net sales, Koito streamlined operations by reducing fixed expenses and shortening the product development
cycle. However, depreciation expenses for new overseas headlamp production facilities and foreign exchange losses combined to
bring consolidated operating income down 9.0% to ¥9,288 million. Consolidated net income for the year fell 11.3% to ¥3,412 million.
management’s discussion and analysis
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Business Results by Geographical Segment
>>>Japan
The automobile lighting equipment segment performed strongly, but the non-automotive electrical equipment and other products
segments saw orders placed by government bodies fall. These factors combined to take total sales up 0.2% to ¥213,880 million.
Operating income rose 1.8% to ¥8,859 million.
>>>North America
The U.S. economy continued to be robust in all respects. However, the appreciation of the yen caused net sales to fall 0.2% short
of last year’s total, coming to ¥35,384 million. This helped bring operating income down 58.3% to ¥697 million, due to expenses
related to the expansion of Koito subsidiary North American Lighting, Inc. (NAL) and a rise in R&D expenses.
>>>Asia
Asian economies have overcome the problems presented by the currency crisis, and are making swift recoveries. Automobile
production is once more exhibiting healthy growth, and sales at THAI KOITO COMPANY LIMITED and Inhee Lighting Co., Ltd. both
increased as a result. Total sales rose 15.7% to ¥25,302 million, with operating income climbing 14.2% to ¥2,062 million.
>>>Europe
Sales fell 11.5% to ¥4,466 million due to the appreciation of the yen. Increases in R&D expenses and depreciation on investments
in headlamp production facilities took costs up, which resulted in operating loss decreasing 17.9% to ¥294 million.
FINANCIAL POSITION
Total assets rose ¥7,280 million to ¥275,063 million. Current assets decreased ¥703 million, coming to ¥152,983 million. This was
due to the sale of marketable securities to fund the redemption of Koito bonds that reached maturity during the year. Property,
plant and equipment fell ¥4,625 million to ¥76,808 million, primarily due to a low level of capital expenditures. Investments climbed
¥11,458 million to ¥40,824 million, the reasons being the purchase of investment securities and an increase in long-term loans
receivable at Koito Enterprise Corporation. Total liabilities rose ¥4,628 million to ¥156,256 million. Interest-bearing liabilities rose
¥5,123 million to ¥54,050 million as a result of Koito Enterprise Corporation’s issuance of bonds and an increase in both short- and
long-term debt at the parent company. Shareholders’ equity increased ¥2,557 million, coming to ¥92,848 million. The sharehold-
ers’ equity ratio was 33.8% as opposed to the 33.7% of the year before.
CASH FLOWS
In the fiscal year under review, a large share of cash flows were used for the redemption of bonds and acquisition of property and
equipment. However, despite a decline of 13.1% in income before income taxes to ¥7,341 million, consolidated cash and cash
equivalents (hereafter referred to as net cash), increased ¥1,359 million to ¥20,285 million.
Factors affecting changes in net cash for the year were as follows.
Net cash provided by operating activities
Net cash provided by operating activities totaled ¥21,363 million. Major contributors of cash were depreciation of ¥17,366 million,
an increase in notes and accounts payable of ¥3,214 million and net income of ¥3,412 million.
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Net cash provided by investing activities
Net cash used in investing activities came to ¥26,055 million. Acquisition of property and equipment was ¥15,220 million. There
was also an increase in investment securities of ¥6,669 million and a net increase of ¥3,897 million in long-term loans.
Net cash provided by financing activities
Net cash provided by financing activities was ¥6,051 million. Long-term bank loans provided ¥11,941 million and ¥10,000 million
was used for bond redemption expenses.
No comparisons with previous years have been made as this is the first year in which Koito has produced a consolidated
statement of cash flows.
CAPITAL EXPENDITURES
Capital expenditures totaled ¥15,220 million. The majority of this amount went into streamlining and updating production facilities,
boosting product quality and setting up cost-efficient facilities in the automobile lighting equipment segment. Capital expenditures
are predicted to come to ¥22,200 million in the current fiscal year as this segment continues to make investments for further
improvements in the three areas outlined above, at Koito, NAL and THAI KOITO.
Y2K READINESS
The Y2K issue was taken up as a central issue throughout the entire Koito Group. A comprehensive program to deal with the Y2K
issue has prevented the occurrence of any problems to date. Koito will continue to position risk management as a key manage-
ment theme, and upgrade its efforts in this area.
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2000 ANNUAL REPORT
consolidated balance sheets
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Thousands ofMillions of yen U.S. dollars
At March 31 1999 2000 2000
ASSET
Current assets:
Cash and time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 14,951 ¥ 13,889 $ 130,843
Notes and accounts receivable—trade . . . . . . . . . . . . . . . . . . . . . . . . . 72,179 72,305 681,158
Less: Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . (768) (1,237) (11,653)
71,411 71,068 669,505
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,307 39,262 369,872
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,583 18,004 169,609
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 911 1,367 12,878
Prepaid expenses and others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,523 9,393 88,487
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153,686 152,983 1,441,196
Investments:
Investments in securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,205 22,799 214,780
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,031 7,928 74,686
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,650 5,224 49,213
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,755 6,018 56,693
Less: Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . (16) (22) (207)
Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,624 41,947 395,167
Property, plant and equipment, at cost:
Buildings and structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,442 62,363 587,498
Machinery, equipment and tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129,787 131,596 1,239,717
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (127,372) (132,510) (1,248,327)
65,857 61,448 578,878
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,739 13,099 123,400
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,835 2,259 21,281
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . 81,433 76,808 723,579
Translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,037 3,322 31,295
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 267,783 ¥ 275,063 $ 2,591,267
KOITO MANUFACTURING CO., LTD. and Consolidated Subsidiaries
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KOITO MANUFACTURING CO., LTD.
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Thousands ofMillions of yen U.S. dollars
At March 31 1999 2000 2000
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Notes and accounts payable—trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 55,258 ¥ 57,392 $ 540,668
Short-term loans (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,277 15,968 150,428
Current maturities of bonds (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 – –
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,401 1,812 17,070
Accrued expenses and other current liabilities . . . . . . . . . . . . . . . . . . . 28,353 26,749 251,992
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113,293 101,923 960,178
Non-current liabilities:
Long-term debt (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,650 32,560 306,735
Bonds (Note 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 5,522 52,020
Accrued severance indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,559 14,065 132,501
Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,124 2,185 20,584
Total non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,335 54,333 511,851
Contingent liabilities (Note 6)
Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,863 25,958 244,540
Shareholders’ equity:
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,270 14,270 134,432
320,000,000 shares authorized and 160,789,436 shares of
¥50 par value issued at 31 March, 1999 and 2000
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,107 17,107 161,158
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,912 61,469 579,076
90,291 92,848 874,686
Less
Treasury common stock, at cost
597 shares in 1999 and 50 shares in 2000 . . . . . . . . . . . . . . . . . . . . . (0) (0) (0)
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,291 92,848 874,686
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . ¥267,783 ¥275,063 $2,591,267
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2000 ANNUAL REPORT
consolidated statements of income
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Thousands ofMillions of yen U.S. dollars
For the year ended March 31 1999 2000 2000
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥275,934 ¥279,034 $2,628,676
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234,987 237,701 2,239,293
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,946 41,332 389,373
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . 30,745 32,044 301,874
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,201 9,288 87,498
Other income (expenses):
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 953 622 5,859
Interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,471) (1,267) (11,935)
Loss on sale and disposal of property and equipment . . . . . . . . . . . . . (120) (181) (1,705)
Others, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (110) (1,122) (10,569)
Income before income taxes and minority interests . . . . . . . . . . . . 8,451 7,341 69,156
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,486 2,997 28,233
Income before minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,965 4,344 40,932
Minority interests in consolidated subsidiaries . . . . . . . . . . . . . . . . . (1,118) (931) (8,770)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 3,846 ¥ 3,412 $ 32,143
Yen U.S. dollars
1999 2000 2000
Per share:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 23.92 ¥ 21.23 $ 0.200
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.00 10.00 0.094
Weighted average number of shares (in thousands) . . . . . . . . . . . . . . 160,789 160,789 160,789
KOITO MANUFACTURING CO., LTD. and Consolidated Subsidiaries
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KOITO MANUFACTURING CO., LTD.
consolidated statements of shareholders’ equity
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Thousands ofMillions of yen U.S. dollars
For the year ended March 31 1999 2000 2000
Common stock:
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥14,270 ¥14,270 $134,432
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥14,270 ¥14,270 $134,432
Additional paid-in capital:
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥17,107 ¥17,107 $161,158
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥17,107 ¥17,107 $161,158
Retained earnings:
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥49,934 ¥58,912 $554,988
Adjustment for adoption of tax-effect accounting . . . . . . . . . . . . . . . . . 4,552 568 5,350
Adjustment for newly consolidated subsidiaries . . . . . . . . . . . . . . . . . . 2,012 – –
Beginning balance, as adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,498 59,480 560,339
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,846 3,412 32,143
Deductions:
Cash dividends applicable to the year . . . . . . . . . . . . . . . . . . . . . . . . . (1,286) (1,286) (12,114)
Bonuses to directors and corporate auditors . . . . . . . . . . . . . . . . . . . (146) (138) (1,300)
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥58,912 ¥61,469 $579,076
Treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0) (0) (0)
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥90,291 ¥92,848 $874,686
KOITO MANUFACTURING CO., LTD. and Consolidated Subsidiaries
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2000 ANNUAL REPORT
consolidated statements of cash flows
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KOITO MANUFACTURING CO., LTD. and Consolidated Subsidiaries
Thousands ofMillions of yen U.S. dollars
For the year ended March 31 1999 2000 2000
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 3,846 ¥ 3,412 $ 32,143
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,440 17,366 163,598
Minority interests in consolidated subsidiaries . . . . . . . . . . . . . . . . . 1,218 931 8,770
Provided for allowance for doubtful accounts . . . . . . . . . . . . . . . . . – 576 5,426
Provided for accrued severance indemnities . . . . . . . . . . . . . . . . . . 300 (473) (4,459)
Loss and evaluation on marketable securities . . . . . . . . . . . . . . . . . – 88 829
(Profit) loss on sale and disposal of property and equipment . . . . . (25) 52 489
Change in operating assets and liabilities:
Notes and accounts receivable—trade . . . . . . . . . . . . . . . . . . . . . 7,912 (1,160) (10,927)
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,032 (277) (2,609)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,383 84 791
Prepaid expenses and others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386 452 4,258
Notes and accounts payable—trade . . . . . . . . . . . . . . . . . . . . . . . (7,969) 3,214 30,277
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (813) (1,619) (15,252)
Accrued expenses and other current liabilities . . . . . . . . . . . . . . . (1,771) (395) (3,721)
Other—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,784) (888) (8,365)
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . 27,155 21,363 201,252
Cash flows from investing activities:
Acquisition of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . (15,751) (15,220) (143,382)
Proceeds from sales of property and equipment . . . . . . . . . . . . . . . . . 216 571 5,391
Increase in investment in securities . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,980) (6,699) (63,108)
Increase in long-term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,352) (3,897) (36,712)
Increase in other investments and other assets . . . . . . . . . . . . . . . . . (5,364) (810) (7,630)
Net cash used in investment activities . . . . . . . . . . . . . . . . . . . . . (30,231) (26,055) (245,454)
Cash flows from financing activities:
Increase in other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 45 1,471 13,857
Decrease in short-term bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . (72) (698) (6,575)
Increase in long-term bank loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,692 11,941 112,491
Issuance of bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 5,543 52,218
Repayment of bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,061) (10,000) (94,206)
Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,286) (2,205) (20,772)
Net cash (used in ) provided by financing activities . . . . . . . . . . . 3,318 6,051 57,004
Change in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242 1,359 12,803
Cash and cash equivalents at beginning of the year . . . . . . . . . . . . . . . . 18,684 18,926 178,295
Cash and cash equivalents at end of the year . . . . . . . . . . . . . . . . . . . . . ¥ 18,926 ¥ 20,285 $ 191,098
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KOITO MANUFACTURING CO., LTD.
notes to consolidated financial statements
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1. Basis of presentation
KOITO MANUFACTURING CO., LTD. (the “Company”) and its subsidiaries maintain their accounts in conformity with the financial accountingstandards of Japan, and its foreign subsidiaries maintain their accounts in conformity with those of their countries of domicile.
The accompanying consolidated financial statements have been prepared in accordance with accounting principles and practicesgenerally accepted in Japan and compiled from the consolidated financial statements filed with the Minister of Finance as required by theSecurities and Exchange Law of Japan and include certain additional financial information for the convenience of readers outside theseconsolidated financial statements, although such statements are not required in Japan.
2. Summary of significant accounting policies
(1) The accompanying consolidated financial statements for the years ended March 31, 1999 and 2000 include the accounts for the Com-pany and the 20 subsidiaries listed below:
Equity ownershippercentage (*)
Name of consolidated subsidiaries %
KOITO INDUSTRIES, LIMITED 50
Koito Transport Co., Ltd. 100
Koito Enterprise Corporation 100
Aoitec Co., Ltd. 51
Minatsu, Ltd. 100
Nissei Industries Co., Ltd. 62
Shizuokadenso Co., Ltd. 100
Shizuoka Kanagata Co., Ltd. 40
Haibara Machine and Tools Co., Ltd. 100
Shimizu Plating Co., Ltd. 100
Fujieda Auto Lighting Co., Ltd. 100
Kosmotec Co., Ltd. 100
Shizuoka Wire Harness Co., Ltd. 100
North American Lighting, Inc. 94
Ta Yih Industrial Co., Ltd. 33
Shanghai Koito Automotive Lamp Co., Ltd. 45
THAI KOITO COMPANY LIMITED 62
Koito Europe Limited 100
India Japan Lighting Ltd. 50
Inhee Lighting Co., Ltd. 50(*) Represents ownership at March 31, 2000 and includes shares owned through a consolidated subsidiaries
(2) Principles of consolidation and accounting for investments in unconsolidated subsidiaries and affiliatesThe accompanying consolidated financial statements include the accounts of the Company and its significant subsidiaries. All signifi-cant intercompany balances and transactions have been eliminated in consolidation. The excess of the costs over the underlying netequity of investments in the consolidated subsidiaries is amortized over five years.
Investments in two affiliates (owned 20% to 50%) are stated at cost plus equity in their undistributed earnings. Consolidated netincome or loss include the Company’s equity in the current net income or loss of such companies, after the elimination of unrealizedintercompany profits.
(3) Translation of foreign currency financial statementsThe balance sheet accounts of the consolidated foreign subsidiaries are translated into yen at the rate of exchange in effect at thebalance sheet date, except for the components of shareholders’ equity which are translated at historical exchange rates. Revenue andexpense accounts are translated at the average rate of exchange in effect during the year.
Translation differences are presented as “translation adjustments” in the accompanying consolidated financial statements.
(4) InventoriesInventories are stated principally at cost. The cost of finished products and work in process are determined primarily by the weighted-average method. Raw materials and supplies are determined by the moving-average method.
(5) SecuritiesSecurities with market quotation held by the Companies are valued at the lower of cost or market. Other securities held by the Compa-nies are valued at cost. Cost is determined by the moving-average method.
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2000 ANNUAL REPORT
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(6) Property, plant and equipment and depreciationProperty, plant and equipment are carried at cost less accumulated depreciation. Depreciation is computed with the declining-balancemethod or straight-line method, at rates based on the estimated useful lives of the assets.
Machinery held by the Company is depreciated over useful lives estimated by the Company which are between 3 to 7 years.Normal repairs and maintenance, including minor renewals and improvements, are charged to income as incurred.
(7) Accrued severance indemnities and pension planUnder the terms of the retirement plans of the Companies, substantially all employees are entitled to severance payments at the timeof severance from the Companies. The amount of the payment is based on the length or service, salary at the time of severance, and thecause of the severance.
The company has a non-contributory funded pension plan which covers substantially full amount of the payment at the retire-ment age under the above retirement plan.
Accrued severance indemnities of the Company are recorded at the amount which would be required if all eligible employeesretire involuntarily at the balance sheet date less amount funded under the above pension plan.
The domestic consolidated subsidiaries recorded their accrued severance indemnities at the amount which would be requiredif eligible employees retired voluntarily at the balance sheet date. However, KOITO INDUSTRIES, LIMITED recorded its accrued severanceindemnities at 40 percent of the amount which would be required if eligible employees retired voluntarily at the balance sheet date.
In addition to the above accrued severance indemnities, the consolidated subsidiaries have pension plans which cover a por-tion of severance payments at the retirement ages.
The directors and corporate auditors of the Company are covered by a retirement benefit plan which allows retiring directors orcorporate auditors to receive lump-sum retirement benefits. The amount of such benefits is determined based on the length of serviceand the level of remuneration at the time of retirement. The liability for such benefits is recorded in the other long-term liabilities at theamount which would be required if all directors and corporate auditors retired at the balance sheet date.
(8) Income taxesEffective April 1, 1998, the Company changed its method of accounting for income taxes to adopting tax-effect accounting following theliability method for the Company and its subsidiaries. Until the year ended March 31, 1998, tax effect accounting was adopted only bycertain foreign subsidiaries.
(9) Appropriation of retained earningsUnder the Commercial Code of Japan, proposals by the Board of Directors for the appropriation of retained earnings (principally thepayment of annual cash dividends) should be approved by a shareholders’ meeting which must be held within three months of the endof each financial year. In addition to such appropriation, the Code permits the Board of Directors to distribute cash to shareholders at aninterim date (interim dividend). The appropriation of retained earnings reflected in the accompanying consolidated financial statementsfor each financial year represents the appropriation which was approved by the shareholders’ meeting or by the Board of Directors anddisposed of during that year.
The payment of bonuses to directors and corporate auditors is made out of retained earnings instead of being charged toincome for the year and constit